UAE eyes new rules on markets, funds by mid-2012

UAE eyes new rules on markets, funds by mid-2012

New rules in the United Arab Emirates on mutual funds, short-selling, and rights issues may be finalised by mid-2012 as part of measures to strengthen the operation of exchanges and attract overseas investors, the regulator said on Tuesday.

February 28, 2012 2:56 by Reuters

Last year, the UAE postponed draft regulations on its nascent asset management industry, which were seen as a key step for investor protection and boosting market confidence, after market players voiced concerned that some of the proposals lacked clarity, sources said.

Abdullah al-Turifi, CEO of the Securities & Commodities Authority (SCA), told reporters on Tuesday that the body was finalising regulations which could be issued by mid-year.

“These new regulations and mechanisms, products and services for the markets will complete the regulatory framework for the system,” he said, adding the rules also covered market makers.

Mutual funds, earlier regulated by the central bank, are now under the ambit of the SCA. The regulator licensed three mutual funds last year and plans to promote foreign mutual funds, Turifi said.

The three licensed funds are run by Abu Dhabi Islamic Bank , Al Hilal Bank and Al Mal Capital.

The UAE bourses are still classified as frontier markets by Index provider MSCI, failing to make the grade to emerging markets status late last year.

The exchanges hope that an upgrade would bring in much-needed capital from foreign investors and raise their profiles as they seek to become regional financial centres.

Foreign ownership in companies is limited to 49 percent but most companies have lower levels of foreign investors.

A long-awaited companies’ law is unlikely to raise this limit, said Turifi.

“We have our own strategy for the new companies law, it won’t open up to 100 percent for foreign ownership, only for certain industries,” he said.

The UAE has many free zones where 100 percent ownership is allowed and foreign companies can invest there, he added.

Poor market conditions and weak investor sentiment have deterred companies from listing on the UAE stock exchanges. Last year only three companies were listed, he said, declining to say how many may list this year.

“It is left to the companies. We are encouraging them,” he said.

There are 128 companies listed on the Abu Dhabi Securities Market and the Dubai Financial Market. (Reporting By Stanley Carvalho; Editing by Firouz Sedarat)